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Friday, August 31, 2001, updated at 16:51(GMT+8)

Postage-hike Contrarily Brought Deficits to China Post

For many years, China's Post has been under a straitened situation of deficit. Lower postage rates than cost has led to deficits and raising postage rates is alleged to be the way out according to China Post.

But in the years from 1995 to 1999, China Post raised its postage rates for several times. It has seen to it that postage charge on an ordinary letter be raised from 0.08 yuan to 0.80 yuan and it seem no one knows what there has been contrarily a yearly increased deficit from 4.7 billion yuan to 15.4 billion yuan.

For a long time, China Post has been listed among those of money losers in China. When will it break away from the corner is still unknown.

In fact, China Post should have been an admirable golden enterprise. It has more than 67,000 subsidiaries across China, among which, over 16,200 are electronicalized offices. With a transport and logistic network covering the cities and regions and 201 mail handling (logistic) centers across China and 175 automatic package-selecting machines, it has a powerful tridimensional transportation capacity. China Post is not only a chain service provider but also a logistics enterprise of the largest in China.

However, such brilliant figures have failed to prosper this post giant China Post.

According to China Post, after splitting off telecom industry from postal service in 1998, with telecom fund deprived, the postal service system made a loss of 14.2 billion yuan henceforward fell into the deep deficit slough.

China Post also said that China's postal service adopts common correspondence services. Its system uses nationwide network and adopts nationwide settlement. No subsidiaries under it can settle accounts on their own nor it has the right to fix the rate of postage charges. All are strictly controlled by the state and placed at a level lower than the cost. Hence deficits incurred.

In one word, postage charges lower than cost only lead to deficit.

If Milkmen Also Send Letters

Now let's start with postage charge on an ordinary letter, the most basic mail. This is a very interesting mathematics problem:

According to calculations by China Post, sending an ordinary letter is at the cost of 1.36 yuan. But for 0.80 yuan of postage charge on an ordinary letter 0.56 yuan of deficit would be been incurred. This is to say the more letters sent, the greater deficit would be resulted.

Then such is a calculation for China Post:

On a bag of 250-g milk is surcharged 0.03 yuan as transport fee. In this way there is still profit gain to be made. Otherwise, milkmen should have abandoned their job for livelihood.

However, if the bag of milk is mailed by post office. Equaling to 13 letters in weight, one bag of milk will have to be charged for 10.40 yuan. Even in this way, China Post still claims that it will lose 0.56กม13=7.28 yuan for sending the milk. In other words, on a bag of milk will be surcharged 17.68 yuan by the post office. At last, the post office makes no cent for profit. The price of a 250-g bag of milk is only 0.80 yuan in the market. If the post office sends the milk, is there any possibility for the milk factories and companies to survive?

If the milkmen could be allowed to send letters and set up post offices, their postage charge will certainly not be so expensive.

Monopoly Should Be the Blame

But China Post claims that it is not monopoly but exclusive business operation that is to blame. Yes, it is much more pleasing to the ear to call a dog "doggie", however, the exclusive operation is full of arbitrary monopoly.

There are many funny things in post offices under the China Post system. Typical is a famous "brick parcel".

Once, a person went to the post office to send a shirt. The weight turned out to be 230 grams. According to stipulations of "Postage Rates Chart", only goods over 500g in weight can be posted as parcels. Those that are under 500g in weight can only be sent as express mail. The postage charge should be over 20 yuan. However, the price of the shirt costs only 12 yuan.

Finally the sender got a method. He/she put a brick in the packet which made the weight certainly exceed 500g. In this way, the packet was mailed at last as parcel which only cost the sender 3 yuan. It is impressively marked out in the column of "content" in the parcel note: "shirt and brick"! Such a preposterous thing could only happen in China under the planned economy. However, the same thing keeps on in the market economy era. Is this what they have called "the countermeasure" with unique Chinese characteristics?

Postage-hike Only Results in Deficit

According to explanations by China Post, fixed postage rates are lower than cost that has led to deficits. The way out is to raise the rates of postage charge.

Is it the real case?

China Post adjusted its postage for several times between the years 1995 and 1999. The charge on an ordinary letter was first raised from 0.08 yuan to 0.20 yuan, up 250 percent. Later, it rose from 0.20 to .080 yuan, up 400 percent. During a short span of several years, postage on an ordinary letter increased from 0.08 yuan to 0.80 yuan, 1000 percent up.

But a sharp raise of postage rates had failed to reduce the deficit of postal services, instead, due to a sudden reduction of business volume, the sphere of deficits was further enlarged. The annual loss has spiraled from 4.7 billion yuan to 15.4 billion yuan.

China Post has also raised its postage charge on printed matter by a big margin since 1985. An excess of postage charge on printed mater turns out that many newspapers and magazines for a raise of about 40 percent postage charge imposed over their subscription fees) have been forced to put up a "stove" on their own. Some media/publishing entities with a strong regional character even set up distribution centers of their own and come further to merge these into an operational nationwide network for distribution beyond China Post service. By this alone, according to statistics, China Post has suffered a loss of 3 to 4 billion yuan.

In the past 10 years, the business volume of China Post has failed to keep up with the rapid growth of China's economy. On the contrary, it shrank from year to year. The decline of business volume, to a great extent, is the result of a sharp rise of postage rates.

Statistics show that by the end of last year China's per-capita postal consumption averaged only 0.37 yuan, at a level less than the cost of a cheap ice-lolly! Under such a situation, how could it be possible for the deficit to decline?

By PD Online staff member Du Minghua

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For many years, China's Post has been under a straitened situation of deficit. Lower postage rates than cost has led to deficits and raising postage rates is alleged to be the way out according to China Post.

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